Like Git says, you have to remove your untracked working tree files (in your case there is only one called 'README.md'). If you have changes you want to keep, commit them, and then do a pull.

Question: why didn't you do a git clone ...?

EDIT

When you do a git pull, git does a git fetch followed by a git merge. The merge could be as simple as a fast-forward, if you did not divert from the remote. But if you did, git needs to merge the changes together. To make sure you do not loose any work, git complains if there are changes to a file that will be touched by a merge in your working directory.